Stanbic Bank pledges to support local oil and gas service providers

Stanbic Bank is one of the sponsors of a two day policy seminar on “Challenges Associated with the Development of the Oil Sector in Uganda” taking place at Speke Resort Munyonyo. New Vision business writer, Ibrahim Kasita asked Sarah Arapta head investment banking about the bank’s strategy in Uganda’s oil and gas industry. Below are the excerpts:

Question: Why is Stanbic Bank interested in the oil and gas sector in Uganda?

Answer: Oil and Gas is a core sector for Standard Bank Group, the bank has been named Best Investment Bank in Africa with five awards. The bank has an Oil and Gas specialist bank this is in addition to mining, metals, power and infrastructure.
 

Question: What opportunities does the oil and gas sector present to the financial and insurance industry?

Answer: The financial sector opportunities include: Syndicated loan facilities, structured trade finance, corporate banking, asset leasing, treasury management, forex trading and SME banking. Other sectors are collections and payments in addition to capital markets and advisory opportunities as the industry grows Insurance opportunities include: third party liability, medical insurance, transit cargo insurance, motor vehicle insurance, corporate indemnity, group life insurance, medical insurance

Question: The oil and gas industry is of a long-term nature and commercial banks in Uganda are reluctant to offer loans to support oil goods and service providers. What does Stanbic Bank have in place to support the sector?

Answer: On the contrary, we believe banks in Uganda are eager to finance oil & gas service prodders considering the off takers in the sector who are typically the oil majors, Banks will finance these service companies based on the tenor of service contracts entered into. More investments in form of capital will be required to appraise and develop discovered oil and gas fields as well as infrastructure for storage refining and transportation. Various financing solutions ranging from project finance and infrastructure bonds can considered. Long term financing can, for example, be arranged through syndications or a consortium of financial institutions including Development finance institutions DFI’s that typically offer long term financings We can also arrange and advice on debt capital markets that would provide long term finance from interested institutional and retail investors

Question: How can local businesses tap into the oil and gas industry?

Answer: Indigenisation of the sector according to the national oil policy for Uganda through shareholding in licenses and provision of goods and services in the sector is one key avenue for achieving the desired value creation in Uganda. With local banks eager to finance the sector, local businesses should have started positioning themselves for these opportunities.

Question: What plans does Stanbic have to support Ugandan businesses involved in servicing the oil and gas sector?

Answer: Stanbic is already providing both advisory and various financing solutions to local companies servicing the sector, products include Vehicle and asset financing, short term invoice discounting facilities, long term financing against long term service contracts with oil majors. Advisory services include buy and or sell side mandates for any local companies planning to get into strategic alliances with either the local or foreign companies. We also provide equity solutions including structuring and coordinating the equity partners (local and international)
 

Question:  What should local entrepreneurs do to access the loans so that they can become competitive?

Answer: Other than the good business practices to access finance , we encourage local entrepreneurs to consider alternative sources of capital like the bond and equity market for startups and small innovative enterprises looking to service the oil and gas sector.

Question: But the interest rates charged are prohibitive….?

Answer: Interest rates charged are typically in line with prevailing market conditions cost of liquidity and underlying credit risk, both local and foreign currency borrowings would reflect risk commensurate with the tenor and structure of the facility undertaken

Question:  In your opinion what will be the impact of oil revenues in Uganda’s financial sector?

Answer: Uganda’s financial sector grows in line with performance of the economy, the oil and gas revenues trickling into the economy will invariably have an effect on the financial sector in the opportunities in both banking and investment banking mentioned earlier.

Question:  How do you thing oil revenue should be managed to avoid distorting the economy?

Answer: The national oil and gas policy in place and approved by Cabinet in February, is meant to guide the country‘s oil revenues to among others promote transparency and accountability and using the finite resources to create lasting benefit to society.

Question:  What does Stanbic Bank aim to achieve in the seminar?

Answer: The seminar will among others inform both policy makers and the private sector about Standard Bank’s extensive Africa oil and gas advisory and financing experience and our ability to deliver End-to-End Solutions targeting the entire O&G value chain across upstream, midstream and downstream.

Question:  What is the way forward?

Answer: Stanbic/ Standard bank is keen to participate in the growth of the sector. Specifically we are looking at the service sector and industries that support the development of this industry. We seek to stay close to the Government supporting the policies that are being introduced and providing input as enthusiastic members of our society.